SEZ Rules (BOA Approved)

7/28/2019 SEZ Rules (BOA Approved)

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Special Economic Zones

Rules 2013


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TABLE OF CONTENTS

Subject Page(s)

I. PRELIMINARY 1-3

1. Short Title and Commencement 1

2. Definitions 1-3

II. Secretariat & Employment 4

3. BOI to act as Secretariat of Board of Approvals and

Approvals Committee 4

4. Employment of the Officers & Employees 4

III. Terms of Offices 5-6

5. Terms of Offices 5

1. Board of Approvals 52. Approvals Committee 53. SEZ Authority 64. SEZ Committees 6

IV. Disclosure of Interest 7

6. Disclosure of Interest 77. Transparency 7

V. Meetings 8-10

8. Meetings 8

1. Board of Approvals 82. Approvals Committee 93. Functions of the Secretary 10

VI. Zone Regulations 11-24

9. Roadmap of Zone Applications 1110. Requirements and Format of a Zone Application 12


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11. Existing Zones 1212. Expansion of SEZ 1313. Public Hearing Regarding a Proposed SEZ 1314. Infrastructure Requirements 13-1615 Evaluation Process of Zone Application 1616. Decision on a Zone Application 16-1717. Short Listing of Developers 1718. Issuance of Tender Documents & Receipt of Sealed Bids 1719. Evaluation of Bids & Selection of Successful Bidder 1820. Development Agreements for a New SEZ 1821. Development Agreement for Existing Zones 1822. Simultaneous Submission of Development Agreement 1923. Decision of BOA on the Development Agreement 1924. Breach of the Development Agreement 2025. Suspension of the Development Agreement 2026. Cancellation of the Development Agreement 2127. Appeals for Developers 21

28. Appointment of SEZ Administrator 2229. Re-Tendering for the Selection of a Developer 2230. Land Acquisition 2231. Property Limitations 2332. Land Use 2333. Land Use Efficiency 2334. Sub-lease of Land by Developer to Zone Enterprise 2335. Application of Law of Land 2436. Cancellation of SEZ Status 24

VII. SEZ Committee 25

37. Establishment of SEZ Committees 2538. Charter of SEZ Committee 2539. Meeting of SEZ Committee 2540. Responsibilities of SEZ Committee for

Administration and Oversight 25

VIII. Zone Enterprise 26-27

41. Zone Enterprise Admission Criteria 2642. Admission of Zone Enterprise 2643. Building Code Enforcement 2744. Operations of Zone Enterprise 27

IX. Incentives and Benefits 28

45. Qualification for incentives 2846. Incentives for Developers 2847. Administration of incentives 2848. Incentives for existing zones 28

49. Extraterritorial Benefits 28


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X. Oversight and Enforcement 29-32

50. SEZ Certification 2951. Zone Enterprise Certification 2952. Sanctions for Failure to achieve Certification 30

53. Decertification and sanctions for Enterprises in Operation 3054. Appeals of Decertification 3255. Authority of BOA and SEZ Authority 3256. Oversight of Developers 32

XI. Budget & Accounts 33-34

57. Annual Budget Statement 3358. Annual Accounts 3359. Annual Audit of the Accounts 3360. Internal Controls 33

61. Internal Audit & Compliances 34

XII. Financial Rules 35-37

62. SEZ Financial Rules 35-37

FIRST SCHEDULE 38

ANNEXES 39-53

Annex-1 Zone Enterprise Admission Criteria 39

Annex-2 Documents to be attached with ZoneEnterprise Entry Application 40

Annex-3 Format of Zone Enterprise Entry Application 41

Annex-4 Format for letter of Approval of Zone EnterpriseEntry Application 44

Annex-5 Qualification and approval criteria for approval of

Zone Application 46

Annex-6 Documents Required with Zone Application 47

Annex-7 Format of Zone Application 49

Annex-8 Contents of Development Agreement 50

Annex-9 BID Evaluation Criteria 52

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NOTIFICATION

Islamabad, _dd_, Month, year

In exercise of powers conferred by Section 40 of the Special Economic Zones Act, 2012 theBoard of Investment, in consultation with Special Economic Zones Authorities and with the

Approval of Board of Approvals, hereby makes the following Rules:-

CHAPTER I - PRELIMINARY

1. Short Title and Commencement

1. These Rules may be called the Special Economic Zones Rules, 2013.2. They shall come into force at once.

2. Definitions

1. In these rules, unless there is anything repugnant to the subject or context:

a) Act means Special Economic Zones Act, 2012 and includes anystatutory modification or reenactment thereof.

b) A member of his/her family - in relation to a member of the Board ofApprovals or Approvals Committee includes:-i. His/her spouse;ii. His/her parents including parents of his/her spouse;

iii. His/her children including an adopted child or stepchild;

iv. His/her brother or sister including a brother or sister of hisspouse;

v. A spouse of his/her child, brother or sister; andvi. His real uncle/aunt and child thereof.

c) associatein relation to a member of the Board of Approvals or Approvals

Committee means:i. A person who is a nominee or an employee of the member;ii. A firm of which the member or his nominee is a partner;iii. A partner of the member;

iv. A trustee of a trust under which the member or a member of hisfamily is a beneficiary; or

v. Any company within the meanings of the Companies Ordinance,1984 of which the member or his nominee or a member of themembers family is a director or has substantial shareholding inthe company.


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d) Authorized Commercial Activities means the manufacturing, trading orprovision of services which may be allowed to zone enterprises,commercial organizations and various suppliers in the SEZ;

e) Conflict of Interest means a situation where a persons decisions are

influenced by his own interests;

f) Contractor means a person engaged by the Special Economic ZonesAuthority, or a Developer or by Federal or a Provincial Government forthe development of a Special Economic Zone;

g) Co-Developer means a partner of the developer for the establishment,development and operations of SEZ.

h) Domestic Tariff Area means the whole of Pakistan including theterritorial waters and continental shelf but does not include the areas of

Special Economic Zones;

i) "Force Majeure Event" means any unforeseeable event, including naturaldisasters, riots, war or acts of terrorism, which could not have beenprevented through exercise of reasonable diligence by any person;

j) Infrastructure means industrial, commercial, or social infrastructure orother facilities necessary for the development and operations of a SEZ orsuch other facilities as may be prescribed.

k) Manufacture means to make, produce, fabricate, assemble, recycle,

process or bring into existence, by hand or by machine, a new producthaving a distinctive name, character or use and shall include processessuch as refrigeration, cutting, polishing, blending, repair, remaking, re-engineering and includes agriculture, aquaculture, animal husbandry,floriculture, horticulture, fishing, pisciculture, poultry, sericulture,

viticulture and mining, petroleum and refining

l) "Master Plan" means a plan depicting the borders and layout of a SEZ andthe basic civil engineering specifications;

m) Minimum investment density means the density calculated by the totalcapital expenditure including land, building, and equipment divided bythe land area;

n) Minimum plot coverage ratio is defined as the building area divided by theland area;

o) Net Worth means the amount by which the individual's assets exceedhis/ her liabilities;

p) "Principal officer", used with reference to a company, means the person

who has the ultimate control of the organization or has been empoweredto deal with and decide all matters relating to the organization in thecontext of SEZ with whatever name called;
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q) Prohibited Commercial Activities means the manufacturing, trading orprovision of services which may not be allowed to zone enterprises,commercial organizations and various suppliers in the SEZ;

r) person includes an individual, whether resident in Pakistan or outsidePakistan and any agency, office or branch owned or controlled by suchindividual; a Hindu undivided family; a co-operative society; a company

whether incorporated in Pakistan or outside Pakistan; a firm; aproprietary concern; an association of persons or body of individuals

whether incorporated or not; and a local authority;

s) "Prescribed" means prescribed by these Rules;

t) "Schedule" means a Schedule to these Rules;

u) Section means a Section of the Special Economic Zones Act, 2012unless specified otherwise;

v) SEZ Authority means a provincial SEZ Authority established underSection 10 of the Act and for the purpose of these Rules, SEZ Authority

will include BOI for Islamabad Capital Territory established underSection 8(2) of the Act.

w) Zone Approval Criteria" means the criteria to be applied by a SEZAuthority and BOA in deciding whether to allow or not to allow aparticular zone to be developed as SEZ;

x) "Zone Category" means a category designated by BOA for SEZs which isgoverned by additional terms and conditions in order to be eligible foradditional benefits;

2. All other words and expressions used in these rules and not defined but definedin the Act shall have the meanings respectively assigned to them in the Act.


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CHAPTER II SECRETARIAT & EMPLOYMENT

3. BOI to act as Secretariat of Board of Approvals and Approvals Committee

1. The Board of Investment shall act as the Secretariat of Board of Approvals(BOA) and Approvals Committee for the purposes of the Act.

2. The Secretariat shall provide all the necessary support to the BOA and ApprovalsCommittee to achieve the objectives of the Act.

3. The Secretariat shall perform all the general and specific functions as providedunder Section 8 of the Act and as may be assigned by the BOA from time to timeand include:

(a) provide secretarial support for all the meetings;

(b) provide policy and research support;(c) provide coordination support;(d) support to organize conferences, seminars, group discussions and other

similar activities; and(e) to do all such acts and things incidental to or conducive to the attainment

of the objects under the Act or Rules.

4. Employment of the Officers & Employees

1. The BOI shall appoint necessary officers and employees as may be required fromtime to time to efficiently discharge the responsibilities and functions in order to

achieve the objectives provided in the Act. The terms and conditions of suchappointment shall be market competitive to attract and retain such resources.

2. All appointments shall be made in accordance with the prescribed educational,technical or professional qualifications and experience. The provinces shall havetheir quota in such appointments in accordance with applicable rules andregulations.


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CHAPTER III TERMS OF OFFICES

5. Terms of Offices

1. Board of Approvals

a) The terms of office of persons as members of Board of Approvals byvirtue of their holding official positions as listed under Section 5(1)(i) to5(1)(xviii) shall come to an end as soon as they cease to hold theirrespective offices by virtue of which they were so notified.

b) The term of office of the professional as provided under Section5(1)(xviii) shall be three years unless he becomes disqualified or resignsearlier. The said professional shall have at least 15 years provenexperience of Pakistan and shall possess any of the followingqualifications:

i. Masters degree from an institution duly recognized by HigherEducation Commission of Pakistan ineconomics/finance/management sciences/ law/; or

ii. Chartered Accountant or BSc/ B.E in Engineering possessingsenior level experience in industrial development/estatedevelopment and administration.

c) Upon vacation of any of the office(s) as listed under Section 5(1)(i) to5(1)(xviii) in the Act, the positions shall be considered filled upon the

new persons taking up the corresponding official position(s). TheSecretary of Board of Approvals shall inform such persons about theirdefault memberships of Board of Approvals and also provide them abriefing and minutes of last three meetings.

d) In the case of a casual vacancy occurring in the seat of the professionalappointed under Section 5(1)(xviii), the same shall be filled within 30days. The Secretary of Board of Approvals shall inform such professionalabout his role and also provide him briefing and minutes of last threemeetings.

2. Approvals Committee

a) The terms of offices of members of Approvals Committee by virtue oftheir holding official position as listed under Section 7(1)(i), 7(1)(ii) &7(1)(iv) of the Act shall come to an end as soon as they cease to holdtheir respective offices by virtue of which they were so notified.

b) The terms of office of members of Approvals Committee appointedunder Section 7(1)(iii) of the Act shall be three years unless they becomedisqualified or resign earlier.

c) The private sector representatives from different sectors and regions shallbe as under:


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i) The private sector representatives from various sectors shall be atleast three persons being chairpersons of associations of top threeperforming sectors of Pakistans economy i.e. one each frommanufacturing, trade and services.

ii) The private sector representatives from various regions shall be atleast seven i.e. one each from four provinces, one from FATA,one from ICT and one from Gilgit Baltistan and theserepresentatives shall be the leading exporters/highest tax payingbusinessmen of each province, FATA, ICT and Gilgit Baltistan.

iii) Two Co-opted members having the same qualification and termsas stipulated under Rule 5(1)(b):

3. SEZ Authority

a. The members to be appointed by the Chief Minister and BOA as specified underSection 10(3)(f) shall be purely from private sectorand their qualification shall bethat he may be a business / entrepreneur of national / international repute or aperson having bachelors degree in economics or law with minimum of 15 yearsexperience in respective fields.

b) The Chief Executive Officer of a SEZ Authority (SEZA) shall be appointed bythe respective Chief Minister of the Province and shall be a professional havingminimum of 15 years experience in handling and managing reputableorganizations at national level. The said CEO preferably shall possess minimum

of Masters degree in economics/finance/ management sciences or be achartered accountant by profession or equivalent qualification in engineeringdiscipline having dealt with international development finance institutions orforeign investment.

4. SEZ Committees

a) The terms of office of persons as members of SEZ Committee by virtueof their holding official position as listed under Section 23(2) shall cometo an end as soon as they cease to hold their respective offices by virtueof which they were so notified.

b) After vacation of the office as above, the position with respect to SEZCommittee shall be considered filled upon the new persons taking up thesaid official positions. The Secretary of a SEZ Committee shall informthe said persons about their default membership of SEZ Committee andalso provide them briefing and minutes of last three meetings.

c) The Secretary of a SEZ Committee shall be a professionally qualifiedcorporate secretary with minimum of 10 years experience.


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CHAPTER V - MEETINGS

8. Meetings

1. Board of Approvals

a) There shall be given at least 21 days prior notice of meeting with formalworking papers delivered to each member of BOA.

b) The Chairperson BOA, BOI, SEZ Authority by a request in writingsupported by reasons to the Secretary of the BOA may call an urgentmeeting of BOA. The Secretary BOA, keeping in view the urgency of thematter, in consultation with Chairperson BOA or Chairman BOI, mayconvene a meeting on a notice of less than 21 days.

c) Upon receipt of request for meeting of BOA, as above, the SecretaryBOA shall determine a suitable time and location for the meeting andissue notice accordingly.

d) The Chairperson BOA or Secretary BOI may specially invite in themeetings of BOA the person(s) whose presence may facilitate in moreinformed discussion on any agenda item of the meeting.

e) Minutes of the proceedings of all the meetings of the BOA shall berecorded, signed and circulated by the Secretary amongst the membersfor their comments within seven working days. The minutes shall be

recorded in both ways: consecutive item wise and agenda wise.

f) The Minutes shall, upon circulation, stand confirmed if no objection isreceived from members within 14 days of such circulation. Such minutesshall be signed by the Chairperson of the next meeting as proof ofapproval and for identification purposes.

g) The compliance and progress of the decisions taken in the precedingmeeting(s) of BOA shall be reviewed and directed in the followingmeetings till their resolution.

h) All the orders and decisions of the BOA and all other instructions issuedby it shall be authenticated by the signature of the Secretary BOA or anyother member as may be authorized by the BOA in this behalf.

i) The Chairperson of the meeting shall have a casting vote in case ofequality of votes in favor or against an issue.

j) No act or proceeding of the BOA shall be called in question on theground merely of existence of any vacancy in, or any defect in theconstitution of the BOA.

k) No business shall be transacted in a meeting which is not included in theagenda without obtaining permission of the Chairperson.


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2. Approvals Committee

a) The Chief Secretary of each province, and Gilgit Baltistan, representativeof FATA and CEOs of Provincial SEZ Authorities shall be co-opted

under section 7(iv) of the Act, and shall have the right to vote.

b) The meetings of the Approvals Committee constituted under Section 7 ofthe Act, shall be held as and when required.

c) The meetings of the Approvals Committee shall be convened by theorders of the Chairperson of the Approvals Committee by giving 21 daysnotice. The notice of meeting shall accompany working papers as peragenda items mentioned in the said notice of meeting.

d) The meeting shall be chaired by the Chairperson BOI and where the

Chairperson is not present, the members present in the meeting shall electany one of them as the Chairperson of the meeting.

e) The presence of at least fifty percent of members shall constitute quorumfor a meeting of Approvals Committee.

f) All decisions of the Approvals Committees shall be made with simplemajority. Any dissenting views shall be specifically recorded in theminutes.

g) The Chairperson of the meeting shall have casting vote in case of equality

of votes in favor or against the issue under voting.

h) The Secretary BOA/BOI shall also act as Secretary of ApprovalsCommittee.

i) The Chairperson or Secretary BOI may specially invite in the meetings ofApprovals Committee the person(s) whose presence may facilitate in moreinformed discussion on any agenda item of the meeting.

j) Minutes of the proceedings of all the meetings of the ApprovalsCommittee shall be recorded, signed and circulated by Secretary amongst

the members for their comments within seven working days.

k) The Minutes shall, upon circulation, stand confirmed if no objections arereceived from members within 14 days of such circulation. Such minutesshall be signed by the Chairperson of the next meeting as proof ofapproval and for identification purposes.

l) All the orders and decisions of the Approvals Committee and all otherinstructions issued by it shall be authenticated by the signature of theSecretary of Approvals Committee or any other member as may be

authorized in this behalf.


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m) The Approvals Committee shall assist BOA and may makerecommendations to BOA for its final decision.

n) No act or proceeding of the Approvals Committee shall be called in

question on the ground merely of existence of any vacancy in, or anydefect in the constitution of the Approvals Committee.

o) No business shall be transacted the in a meetings of the ApprovalsCommittee which is not included in the agenda without permission of theChairperson.

3. Functions of the Secretary

The Secretary of the BOI shall act as Secretary BOA and Approvals Committee.

The Secretary, inter alia, shall:

(i) Prepare and issue notice of meetings as instructed;(ii) Prepare all working papers for the meetings;(iii) Record minutes, circulate them and handle all matters related and

incidental thereto;(iv) Maintain all the records relating to the meetings;(v) Authenticate and issue documents as may be required;(vi) Appear before any forum as may be required;(vii) Develop various documents/reports/SOPs etc., as may be

required from time to time, for implementation of the Act

and in this context, may hire consultants; and(viii) Ensure operation of a web portal.

The Secretary may be assigned such additional functions as may be determinedby the BOA and Approvals Committee, as the case may be.


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CHAPTER VI ZONE REGULATIONS

9. Roadmap of Zone Applications

1. The SEZ Authorities, by assessing the SEZ needs of their respective provinces,FATA, Gilgit Baltistan and Islamabad Capital Territory, as the case may be, shallplan their respective SEZs in a timely fashion.

2. The SEZ Authorities shall accordingly develop Zone Applications on prioritybasis for the consideration and approval of BOA.

3. Federal Government, Provincial Governments and Private Parties wishing toestablish SEZs shall submit their proposals to their respective SEZ Authorities

which shall prepare required Zone Applications and forward the same to BOA

for its consideration.

4. A SEZ Authority may consider the proposal of Zone Applications falling withinthe parameters of sub rule 1 for onward submission to the BOA forconsideration and approval.

5. The BOA may prescribe a specific qualification and approval criteria for aparticular SEZ or a type of SEZ. However, a general Qualification and ApprovalCriteria for SEZs is provided in Annex 5 of the First Schedule to these Rules.

6. The SEZ Authorities shall maintain lists of authorized commercial activities as

well as prohibited activities for a particular SEZ or type of SEZs, as the case maybe, for each type of industry/business they seek to attract. These lists shall be inthe line of national and regional development needs, under sub rule 1.

7. The SEZ Authorities may amend the list of authorized commercial activities aswell as prohibited activities lists for all or a class of SEZs or a particular or SEZ.

8. The developer wishing to change the authorized commercial activity (ies) orprohibited activity (ies) list may apply for the same to the concerned SEZ

Authority with detailed justification and assessment of potential impact of suchchange in both the scenarios i.e. what if change is allowed and that if change is

not allowed. The SEZ Authorities may ask for additional information/documentwhich they deem necessary for developing the case for BOA approval. Theapproval or rejection or partial approval of BOA, as the case may be, will becommunicated to the concerned developer.

9. For Zone Enterprises wishing to carry out activities or change the activitieswhich are not covered in either list may apply to the concerned SEZ Committeewhich will pass on such application to BOA through the concerned SEZAuthority with its recommendations. The BOA may approve or reject the sameas a policy issue.


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10. Requirements and Format of a Zone Application

The requirements of a Zone Application are stipulated in Annex - 6 of the First Scheduleto these Rules and as provided under Section 11 of the Act. The BOA may,however, prescribe specific requirements for a SEZ or type of SEZ, in each

province and Islamabad Capital Territory.

The format of a Zone Application shall be as per Annex - 7 of the First Schedule tothese Rules.

The SEZ Authority shall clearly specify in the Zone Applications the type and size ofindustries it is targeting for a particular SEZ.

Upon receipt of a Zone Application, the Secretary BOI/BOA shall confirm thecompleteness of the said application. Any incomplete application shall bereturned to the applicant for supplementation.

The BOA shall consider Zone Applications according to prescribed evaluation process asprovided under Rule 15 as well as on the basis of prescribed Zone Qualificationand Approval Criteria provided in Annex-5 of the First Schedule to these Rules.

The BOA may require any additional information/document from a SEZ Authority toevaluate the Zone Application(s) submitted for approval.

11. Existing Zones

1. An existing zone may apply to a SEZ Authority for submission of an applicationon its behalf to BOA, or a SEZ Authority may choose to submit a ZoneApplication with respect to an existing zone to BOA for its approval as SEZ toqualify for the admissible benefits under the Act. In this regard:

(a) A Development Plan is not required to be submitted with the zoneapplication in case the existing zone does not have any furtherinfrastructure development needs;

(b) A Marketing Plan is not required to be submitted with the zoneapplication in case the existing zone is already occupied by over eighty

percent;

2. Criterion for admission of new Zone Enterprises shall be formulated and suchcriteria shall not be mandatory for Zone Enterprises that are already in operation.

3. The existing zone is required to provide free from all encumbrances clear title tothe land or leasehold rights, as the case may be, for all the undeveloped land.

4. All the zone enterprises who have not developed their land must keep clear titleor leasehold rights and, as the case may, free from all encumbrances whatsoever.


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12. Expansion of SEZ

The SEZ Authority or the Developer may seek expansion in the already approved andnotified SEZ. All the requirements applicable to new Zone Applications shall apply to

the expansion application as prescribed under Rule 10 above. The BOA shall considerthe same according to prescribed Qualification and Approval Criteria provided in Annex5 of the First Schedule to these Rules and the BOA shall also take into consideration theprescribed evaluation process. The BOA may reject, accept or accept with conditions theZone Application for Expansion of SEZ as provided under Rule 16 herein under.

13. Public Hearing Regarding a Proposed SEZ

The SEZ Authority shall hold a public hearing regarding a proposed SEZ or proposedexpansion in already approved SEZ. The hearing shall be announced with 30 days noticeperiod and shall be open to all members of public. The minutes of the hearing shall be

provided as part of the Zone Application.

14. Infrastructure Requirements

1. A SEZ shall have adequate infrastructure to support its Zone Enterprises andtheir value chain operations. The Zone Application shall include details ofplanned infrastructure in case of new SEZ and maintenance & improvement inexisting infrastructure in case of an existing zone.

2. BOI and Provincial Investment Promotion Authorities shall play their respectiverole as provided under the Act and these Rules in order to ensure that the

Federal and Provincial Governments, their corresponding departments andagencies provide the requisite infrastructure for the SEZs.

3. The provincial SEZs shall be compliant with the standards and requirements oftheir concerned provincial Environmental Protection Agency and the SEZs

within FATA, Gilgit Baltistan and Islamabad Capital Territory shall comply withthe standards of Pakistan Environmental Protection Agency. Where provincialEnvironmental Protection Agency is not present, the standards of PakistanEnvironmental Protection Agency shall apply.

4. Roads

A proposed SEZ shall have adequate internal road infrastructure and shall haveexternal road connections that link the SEZ to major modes of transportationsuch as highways, airports, and ports as required to support the intendedindustries. In this regard:

(a) If existing roads are inadequate, the Federal and Provincial Governmentsshall ensure adequate road access to the SEZ.

(b) The layout and specifications of the internal roads within SEZ shall beprovided in the Zone Application. Internal roads shall be fully paved and

properly maintained to the zero point of each plot. The internal roadsshall meet the prescribed standard(s).


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5. Electricity

The Federal and Provincial Government shall ensure the provision of powersupply at a stable frequency to the designated zero point of each SEZ. TheDeveloper shall be responsible for the transmission of electricity from zero point

of SEZ to every plot/facility within the SEZ.

6. Natural gas

The Federal and Provincial Government shall ensure the provision of gas supplywith required gas pressure to meet fuel demand. In this regard:

(a) A SEZ Authority shall obtain commitment from concerned gas pipe-line company to provide required quantity of gas and to install relatedinfrastructure to the minimum of zero point of SEZ.

(b) The developer shall be responsible for the transmission of gas from zeropoint of SEZ to every plot/facility within the SEZ.

7. Water

The SEZ shall have required quantity of water having good quality. In thisregard:

(a) Provincial and Federal Governments, as the case may be, shall arrangewater upto the zero point of SEZ; and

(b) The developer shall be responsible for the internal distribution system ofwater to every plot/facility within the SEZ.

8. Sewerage/drainage

The SEZ shall have adequate and efficient sewerage and drainage system withinSEZ. In this regard:

Provincial and Federal Governments, as the case may be, shall providesewerage/drainage system upto the zero point of SEZ; and

The developer shall be responsible for the internal sewerage/drainage system toevery plot/facility within the SEZ.

9. Waste Water treatment

Each SEZ shall ensure waste water treatment facility as recommended by theconcerned Environmental Protection Agency (EPA).

10. Communications

The SEZ shall have all communications infrastructure, including telephone,

internet and cable television within the SEZ.


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11. Security

The SEZ shall have appropriate security facilities within and outside SEZ. In thisregard:

a) The SEZ Authority shall arrange for Special Police Force for the protectionof SEZ within that area as provided under Section 32 of the Act;

b) The Developer shall construct boundary wall of prescribed height around theSEZ and place security cameras/check posts, thereon, as directed and agreed.

c) The Developer shall ensure that all the entrances of SEZ have securedaccess; and

d) The Developer shall arrange appropriate armed security personnel with

necessary equipments and vehicles to be posted at the SEZ entrances and topatrol within the SEZ.

12. Building Code

All structures within a SEZ shall meet the building codes as may be prescribed.

13. Firefighting Facilities

A SEZ shall have appropriate firefighting facilities. In this regard:

(a)The SEZ Authority shall ensure the provision of appropriate capacity ofpublic firefighting facilities within the immediate vicinity of a SEZ; and

(b)The Developer shall ensure industry specific firefighting facilities ofappropriate capacity within the SEZ.

14. Medical Facilities

A SEZ shall have appropriate medical facilities, especially burn unit. In thisregard:

(a) The SEZ Authority shall ensure the provision of appropriate capacity ofpublic hospital facilities within immediate vicinity of SEZ having at least20 bed burn facility; and

(b) The Developer shall develop a hospital-cum-dispensary facility within theSEZ for the treatment of injuries especially burns and capable of meetingthe medical needs of employees and their families residing in and aroundSEZ. The operations and maintenance expenses of such facility shall bemet by the developer who will absorb such expenses in the maintenancecharges/lease rentals on no-profit-no-loss basis.


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15. Academic and Vocational Training Facilities

The SEZ shall have appropriate academic and vocational training facilities. Inthis regard:

(a) The SEZ Authority shall ensure provision of education facilities to meetthe educational needs of the employees of the SEZ; and

(b) In addition to the technical and entrepreneur facilities, there shall beestablished a specialized quality-specific technical training centre to trainmaster trainers with objectives to address quality issues, minimizematerial wastage and adopt new technologies/products. The Developershall provide a building for industry specific technical training facility.

The operations and maintenance expenses of such facility shall be met bythe developer who will absorb such expenses in the maintenancecharges/lease rentals on no-profit-no-loss basis. SEZ Committee may

request any provincial or federal manpower development/technicaltraining entity for any short term advance training courses.

15. Evaluation Process of Zone Applications

The evaluation process shall be as under:

1. A preliminary evaluation of Zone Applications shall be conducted to reviewwhether the application meets the prescribed Zone Qualification & ApprovalCriteria as provided under these Rules. Applications which do not meet theprescribed criteria shall be rejected by recording reasons in writing. The

applications which meet the prescribed criteria shall be considered for furtherdetailed evaluation.

2. A detailed evaluation of a Zone Application shall include but is not limited tofollowing:

a) Appropriateness of site location;b) Result of the feasibility study;c) Adequacy of planned infrastructure;d) Viability of implementation plans;e) Appropriateness of industrial mix and activities;

f) Feasibility of land acquisition plan;g) Appropriateness of zone admission criteria; andh) Assessment of environmental impact

16. Decision on a Zone Application

The BOA may after due evaluation process, reject, approve or approve a ZoneApplication with such conditions as it may deem appropriate, within 90 days of thereceipt of such application.

1. In case BOA rejects a Zone Application, it will briefly specify the reason of such

rejection.


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2. In case BOA rejects a Zone Application, it may propose appropriateamendments subject to which that zone application may be acceptable to theBOA. If the concerned Federal and Provincial Governments or the PrivateParties, as the case may be, accept that amendment, the said zone applicationshall be re-submitted and accordingly approved by the BOA, if other matters

remain the same.

3. In case BOA approves a Zone Application, the approval letter shall provide theterms and condition, if any, of such approval including but not limited toconditions for land acquisition, the development agreement, and arrangementsfor public utilities.

4. In case BOA approves a Zone Application with additional conditions to be met,the same shall be communicated to the Applicant with a deadline for acceptanceor fulfillment of such conditions, as the case may be. If the Applicant accepts orfulfills such additional conditions within the stipulated time, the said Zone

Application shall be approved.

17. Short Listing of Developers

1. Upon approval of a Zone Application by BOA, the concerned SEZ Authorityshall, within 60 days of such approval, prepare SEZ-specific Developer SelectionCriteria, bid evaluation criteria, draft Development Agreement and Terms ofReference for inviting Expression of Interest (EOI) in accordance withapplicable laws.

2. Upon approval of BOA under sub-rule (1) above, the SEZ Authority shall,

within 30 days, publically invite Expression of Interest (EOI) from the interesteddevelopers as per the approved Terms of Reference.

3. The invitation for EOI shall appear in at least two daily newspapers having widecirculation and will also be posted on the concerned websites.

4. The short listing process of developers shall be carried out as per rules andregulations of the concerned SEZ Authority compatible with Public ProcurementRegulatory Authority, 2004 as applicable to all agencies established under federallaw.

5. The developers who submitted EOI shall be shortlisted according to approvedDeveloper Selection Criteria.

6. The short listing procedure shall not be applicable in case of Zone Applicationssubmitted under Sections 4 and 14 of the Act as provided under Section 13(1) ofthe Act.

18. Issuance of Tender Documents & Receipt of Sealed Bids

1. The short-listed/qualified Developers shall be issued tender documents alongwith draft development agreement as part of tender/bid documents requiring

submission of bids within the stipulated time.


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2. The concerned SEZ Authority shall hold a pre-bid meeting with the qualifieddevelopers which have been issued tender documents in order to address theirquestions, remove any difficulty and calibrate their understanding on the tenderdocuments.

3. The bid submission period shall be minimum 30 days after the pre-bid meeting.

4. The sealed bid documents shall be received in the office of the SEZ Authoritybefore the close of office hours on the prescribed date as per Pakistan Standard

Time. The bids received after the close of office hours shall not be considered.

5. The bids received within the stipulated time shall be evaluated as per prescribedBid Evaluation Criteria.

19. Evaluation of Bids & Selection of Successful Bidder

1. The Technical and Financials bids/proposals received shall be evaluatedseparately as per the pre-approved evaluation criteria which shall be as per outlineprovided in Annex-9 of the First Schedule to these Rules.

2. Based on the evaluation of technical and financial bids/proposal, as per approvedcriteria, a SEZ Authority shall select a developer.

20. Development Agreements for a New SEZ

1. The SEZ Authority shall negotiate the Development Agreement with thesuccessful developer and upon finalization submit the same to BOA for

approval.

2. If third party provision of key infrastructure or services is required, suchagreements shall be appended to the development agreement.

3. The contents of the Development Agreement as referred to in sub-rule (1) above,shall be SEZ specific but shall include the contents prescribed in Annex 8 ofthe First Schedule to these Rules.

21. Development Agreement for Existing Zones

1. The SEZ Authority, if identifies the needs for rehabilitation/ improvementor/and further development in an existing zone which applied for SEZ Statusor had been chosen for the SEZ status under Section 15 of the Act, it maychoose to prepare and submit a draft Development Agreement simultaneously

with the Zone Application to BOA.

2. If provision of key infrastructure or services is required by a third party, suchagreements shall be appended to the development agreement.

3. The existing developer of the existing zone who applied for SEZ status or hadbeen chosen for the SEZ status, shall have to comply with the eligibility criteria

of a developer as provided under Section 19 of the Act to qualify forconsideration as developer in the SEZ.


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4. Upon approval of a Zone Application, the existing developer may be grantedprovisional approval to restructure its ownership before the approval becomeseffective.

5. The SEZ Authority, upon approval of a Zone Application and after the

developer has complied with the requirements of sub-rules (3) & (4), shallnegotiate the development agreement with the said developer and submit thenegotiated Development Agreement to BOA for its final approval.

22. Simultaneous Submission of Development Agreement

1. The SEZ Authority may simultaneously submit both a Zone Application and aDevelopment Agreement to the BOA for approval and forego the selectionprocess if the conditions specified in Section 14 of the Act are met.

2. The Developer shall submit a technical proposal and a financial proposal as per

Bid Evaluation Criteria provided in Annex-9 of the First Schedule to theseRules in order to enable the evaluation of its capabilities for developing a SEZ.

23. Decision of BOA on the Development Agreement

1. The BOA may reject or approve or approve with conditions the DevelopmentAgreement within 60 days of submission by SEZ Authority.

2. If the BOA approves the Development Agreement, it may stipulate thenecessary terms and condition of its approval.

3. In case the BOA does not approve the negotiated Development Agreement, itwill record the reasons thereof. Further, the concerned SEZ Authority mayresubmit the Development Agreement with appropriate amendments in light ofthe reasons recorded by the BOA. The same developer shall be provided firstopportunity to be the Developer, however, if the said developer does not agree

with the revised terms of the Development Agreement, a new developer shall beselected through fresh competitive bidding process.

4. The BOA may approve the revised development agreement with or withoutfurther conditions. Further, the final approval may be withheld until certainconditions have been met by the Developer.

5. If the agreements for provision of infrastructure or other services by thirdparties are not executed yet, the BOA may approve the Development

Agreement with conditions and set an appropriate deadline not to exceed oneyear for the Developer to execute the agreements from the date of grant of theconditional approval

6. If the conditional approval expires, the BOA may allow the SEZ Authority torepeat the Developer selection process, or it may choose to cancel the SEZapproval.

7. The BOA may reject the Developer selection or Development Agreement andinstruct the SEZ Authority to redo the process. If the BOA determines that theproblems cannot be remedied, it may opt to cancel the provisional approval of


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the SEZ.

8. In case of any grievance on the transparency of competitive bidding process,negotiation of the development agreement or any material matter, the developermay approach the BOA directly or through SEZ Authority. The BOA shall

address the issue under Section 13(7) of the Act. .

24. Breach of the Development AgreementIf a Developer fails to meet its commitments under the Development Agreement, theconcerned SEZ Authority shall give notice of the breach to the Developer concernedand request cure of the breach. The time allowed for and manner of remediation shall bein accordance with the terms of the Development Agreement. Failure of the Developerto appropriately respond to the notice may result in the suspension or cancellation of theDevelopment Agreement.

25. Suspension of the Development Agreement1. The SEZ Authority (SEZA) may suspend the Development Agreement if the

Developer is in breach of the terms and conditions thereof and has failed to cureits breach accordingly.

2. The right to cancel a Development Agreement only rests with the BOA,though the SEZ Authority may recommend such action to the BOA.

3. A suspension may not last for a period longer than one month. If a suspensionlasts longer than a month for certain reasons, then the Development

Agreement shall be terminated in the public interest.

4. The Developer shall not be eligible for any incentives during thesuspension period.

5. The Developer shall pay a fine for each month of the suspension period. Thequantum of the fine shall be specified in the Development Agreement.

6. During suspension of the Development Agreement, the certified ZoneEnterprises in the SEZ shall be entitled to continuation of their SEZincentives.

7. During suspension of the Development Agreement, the Developer shalltemporarily vacate its position on the SEZ Committee. The Administratorappointed under Rule 28 shall assume the position of Chairperson.

8. At the recommendation of the SEZ Authority or of its own determination, TheBOA may reinstate the Developer and the Development Agreement during thesuspension period if it is satisfied that the SEZ operations cannot continueproperly without the Developer on such term and conditions as it deems fit.

9. The suspended Developer may transfer its property and rights and

responsibilities under the Development Agreement to another person that isapproved by the BOA. The BOA shall evaluate the proposed transfereeaccording to the same process as specified under Rule 19 above. If the transferee


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is approved, the BOA shall reinstate the Development Agreement with the newDeveloper.

26. Cancellation of the Development Agreement

1. The BOA may cancel a Development Agreement in the following circumstances:

The suspension of the Development Agreement has exceeded one month;

(b) The breach of the Development Agreement occurs during thedevelopment phase of the SEZ;

(c) It is determined that there is no possibility for the Developer to remedythe breach;

(d) The Developer has become financially insolvent;

(e) The Developer fails to pay for the costs of an Administratorappointed under the Act or the Rules.

2. Pursuant to cancellation of the Development Agreement, the Developer shall beliable to repay all the incentives of the SEZ received under the Act.

27. Appeals for Developers

1. Prior to any formal action of suspension or cancellation, a Developer shall havethe right of a hearing in person, in which the Developer may be represented by

counsel before the BOA.

2. Any Developer aggrieved by the imposition of a sanction or by the suspensionor cancellation of their certification shall be entitled to seek relief throughalternative dispute resolution forums as provided under the Act or Rules.


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28. Appointment of SEZ Administrator

1. The SEZ Authority shall appoint an interim Administrator to manage the SEZduring the suspension of a Development Agreement or may take such interim

measures as it deems necessary.

2. All rights and responsibilities of the Developer under the DevelopmentAgreement shall vest with the Administrator.

3. The costs of the Administrator during the suspension period shall be recoveredfrom the Developer.

29. Re-Tendering for the Selection of a Developer

1. Once a Development Agreement has been cancelled, the SEZ Authority shall

undertake a new tendering process to secure a new Developer.

2. The process shall be the same as that provided under Rules 17 to 19. If there areany amendments in the original Development Agreement, it shall be submittedto the BOA for approval.

3. The SEZ Authority shall accept the highest financial proposal amongst thetechnically qualified developers.

4. Once approved by the BOA, the new Development Agreement shall beexecuted and put into effect.

5. If no qualified developer is selected, the BOA shall have the following options:

To extend the tenure of the Administrator and direct the concerned SEZAuthority to retender for a new developer; or

To cancel the SEZ status.

30. Land Acquisition

1. Land shall be acquired by a SEZ Authority preferably in the name of the

Developer at developers cost or in its own name. Provided that where the land isacquired by SEZ Authority in its own name it shall be leased out to developer fora period as decided by the concerned SEZ Authority.

2. In case of a Zone Application, where a SEZ Authority gets the approval of ZoneApplication on the behest of a Developer who owns land himself, the saidDeveloper may sell or lease the said land to zone enterprises as he may choose.

3. Public-owned land if used for SEZs, shall be leased out for a period of at leastfifty years extendable for a further period as provided under Section 16(2)(c) ofthe Act.


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4. Where a land is acquired for SEZ, especially the agriculture land, the massesdependent on such land shall be given skills training as to enable them to beinducted as employees within the SEZ and they will be given preference based ontheir skills and education.

31. Property Limitations

The SEZ Authorities may acquire and hold moveable and immoveable property for thepurpose of carrying out their functions under the Act but shall not sell, lease, mortgage,dispose of or transfer in any other manner the said property except for purposesconsistent with the objectives of the Act.

32. Land Use

A SEZ shall use 70% of the area for purpose of operations of zone enterprises.

33. Land Use Efficiency

A SEZ Authority may specify a standard for efficient use of the land which all ZoneEnterprises shall be required to observe. The Zone Enterprises may meet eitherminimum investment density or minimum plot coverage ratio.

34. Sub-lease of Land by Developer to Zone Enterprise

1. The developer having the leased land from SEZ Authority, except as providedunder Rule 30(2) above, shall only sub-lease the land to the zone enterprises for

authorized commercial activities.

2. The term of the sub-lease Agreement shall be as per the agreement between thezone enterprise and the developer.

3. The Developer shall, upon approval of a Zone Entry Application, execute a nontransferable Pre-Sub-Lease Agreement (i.e. Provisional Sub-Lease Agreement)

with the Zone Enterprise.

4. The Developer shall execute a formal Sub-Lease Agreement with the ZoneEnterprise after the same has completed six months commercial operations after

completion of construction activities within 24 months of the date of theapproval of Zone Entry Application or such extended period as approved.

5. Transfer of Sub-Lease Agreement by Zone Enterprise

A Zone Enterprise may only transfer the sub-lease Agreement of land in a SEZif:

(a) Transferee of the sub-lease Agreement by the Zone Enterprise meets theZone Admission Criteria as provided in Annex-1 of First Schedule tothese Rules.

(b) The transferor Zone Enterprise is not in any default and there are nooutstanding dues

(c) The transaction does not amount to real estate activity;


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(d) The prescribed transfer fee has been deposited;(e) The respective SEZ Committee has reviewed and recommended the

application; and(f) Transfer is approved by the respective SEZ Authority.

6. Cancellation of Sub-Lease of Land of Zone Enterprise

If a zone enterprise persistently defaults in fulfilling the requirements of the Actor these Rules and after being notified and provided an opportunity of beingheard, the developer may cancel the Sub-Lease Agreement on therecommendation of SEZ Committee without prejudice to its right to recoverdues, arrears, fines and to take other actions as determined by it.

35. Application of Law of Land

All the authorities, organizations and persons engaged in the creation, development,

operations and management of a SEZ shall follow the respective applicable laws andstandards of Pakistan including but not limited to environment, employment,procurement, building code etc. unless specifically exempted, relaxed or otherwiseprovided in the Act.

36. Cancellation of SEZ Status

In the event that the SEZ status is cancelled, the following shall apply:

If the SEZ has not yet been developed and there are no Zone Enterprises inoperation, any land payments made by the Developer shall be returned subject

to indemnification, damages and fines provided under the developmentagreement and the ownership and future use of the land will be determined bythe SEZ Authority; and


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CHAPTER VII SEZ COMMITTEE

37. Establishment of SEZ Committees

An SEZ Committee shall be established under Section 23 of the Act and it shallperform the functions as provided in the said Section and as may be assigned by theBOA from time to time.

38.Charter of SEZ Committee

At the time of granting the approval of the Development Agreement, the BOA shallissue a charter for the establishment of a SEZ Committee for the SEZ as provided inthe Act.

39.Meeting of SEZ Committee

1. Meetings of a SEZ Committee shall in the ordinary course be held as frequentlyas required to carry out its functions but not less than once a quarter.

2. Requests for extraordinary meetings may be initiated by any member and shall besubmitted to the Chairperson and secretary of the SEZ Committee and shallinclude the specific agenda items to be considered by the SEZ Committee withdetails of and reasons for the same.

3. The chairperson shall call a meeting either in the ordinary course or upon the

requisition of a member. The secretary shall determine a suitable time andlocation for the meeting and shall issue notice to the members together with theagenda for the meeting.

4. The presence of not less than seventy five percent of members shall constitutequorum for an SEZ Committee meeting.

a) Decisions shall be taken by majority vote.

b) Minutes of the proceedings of every meeting shall be recorded. Further,the minutes shall be submitted to the SEZ Authority and the BOI.

40.Responsibilities of SEZ Committee for Administration and Oversight

2. Review and approve zone entry applications from Zone Enterprises as providedin these Rules;

2. Provide for certification of Zone Enterprises as provided in these Rules;

3. Conduct oversight to ensure that Enterprises are meeting their obligations underthe SEZ Regulations; and

4. Enforce the building code according to the SEZ by-laws and other applicableregulations.


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CHAPTER VIII ZONE ENTERPRISE

41.The Zone Enterprise Admission Criteria

The Zone Enterprise Admission Criteria shall be as prescribed in Annex-1 of the FirstSchedule to these Rules. However, specific zone enterprise admission criteria may beprescribed for each type or group of SEZs.

42.Admission of Zone Enterprise

1. Every person wishing to establish a Zone Enterprise shall submit 4 copies of theZone Enterprise Entry Application to SEZ Committee as prescribed in the

Annex-3 along with the prescribed documents as per Annex- 2 of the FirstSchedule to these Rules.

2. The Office of the SEZ Committee shall issue formal acknowledgement of theReceipt of Zone Enterprise Entry Application. A copy of the Application shall beemailed/faxed/sent to Provincial Investment Promotion Authority, SEZ

Authority, SEZ Secretariat/Head Office in Islamabad, Developer, Board ofInvestment and concerned District Government for information and necessaryactions at their end.

3. All Zone Enterprise Entry Applications shall be kept confidential by all personswithin the SEZ Committee, the SEZ Authority and the BOA who have access tothem.

4. A Zone Enterprise Entry Application shall be examined by the concerned SEZCommittee within Thirty (30) working days. SEZ Committee may seek suchadditional information/ documents as it may deem appropriate.

5. The Zone Entry Application should meet the Zone Enterprise AdmissionCriteria, the Zone Regulations and the terms and conditions of the respectiveDevelopment Agreement.

6. The SEZ Committee shall convey its approval of the Zone Enterprise EntryApplication on the prescribed format as per Annex-4 of First Schedule withinThirty (30) working days with intimation to Provincial Investment Promotion

Authority, SEZ Authority, SEZ Secretariat/Head Office in Islamabad,Developer, Board of Investment and concerned District Government. The SEZCommittee shall also forward the copy of its approval of Zone Enterprise Entry

Application to Developer with recommendation to admit the Zone Enterprise inthe SEZ. The Developer, upon receipt of the approval of SEZ Committee shalltake necessary steps leading to admission of the Zone Enterprise in the SEZ inaccordance with Section 24 of the Act.

7. In case if the Zone Entry Application is not approved by SEZ Committee, SEZCommittee will issue a Rejection Letter within Thirty (30) days stating thereasons of such rejection and that the Applicant has a right of Appeal to the SEZ

Authority.


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8. The Applicant may file an Appeal to the concerned SEZ Authority against theRejection Letter within thirty (30) days. Upon receipt of Appeal, SEZ AuthoritysSub-Committee delegated with the power of hearing such appeals shall hear suchappeal within next thirty days (30) of the date of receipt of such Appeal. The

Applicant may appear before the said Sub-Committee in person or through

authorized representative. The SEZ Authoritys Sub-Committee shall hear theAppeal in accordance with the applicable Zone Regulations and DevelopmentAgreement and its decision shall be final in all respects.

43.Building Code Enforcement

1. Every SEZ Committee shall enforce the building code of the SEZ as referred tounder Rule 14(12) and shall designate a panel of qualified, certified engineers toperform this role.

2. The panel shall review the preliminary drawings submitted with the Zone

Enterprise Entry Application and ensure that it is in general compliance with thebuilding code of the SEZ. The assessment shall be completed and provided tothe SEZ Committee within five working days of receipt.

3. The panel shall review the detailed drawings and grant approval before the ZoneEnterprise may be permitted to commence construction within the SEZ. Thedecision of the panel shall be made within fifteen working days of receipt of thedrawings.

4. After the Zone Enterprise has completed construction of its facility, the panelshall inspect the building to ensure that it has been built in compliance with the

building code. The panel shall issue its approval before the Zone Enterprise maybe certified.

5. When Zone Enterprises build new expansion facilities or conduct substantialrenovations, the panel shall conduct inspections to ensure compliance with thebuilding code. Non-compliant facilities shall not be used for operations.

6. The panel shall conduct periodic inspections of facilities within the SEZ toensure that they remain in compliance with the building code.

44.Operations of Zone Enterprise

The Zone Enterprise shall be bound to commence construction of facilities within sixmonths and start authorized commercial activities within twenty four months ofacceptance of its zone entry application or such period as allowed by the competentauthority and after receipt of all required licenses and permits.


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CHAPTER IX- INCENTIVES AND BENEFITS

45.Qualification for incentives

The certification of a SEZ shall entitle the Developer of that SEZ, as well as certifiedZone Enterprises within that SEZ to the benefits specified in the Act and in thisChapter.

46.Incentives for Developers The Developer of a certified SEZ shall be entitled to thebenefits specified in section 34 and 36 of the Act.

47.Administration of incentives

The administration of incentives shall be set up and managed by the BOA and the

Federal Board of Revenue and local revenue authorities.

48.Incentives for existing zones1. Existing zones that are approved as SEZs shall also be granted incentives.2. The Enterprises already in operation prior to the zone's approval as a SEZ shall

not be eligible for incentives as per Section 15 of the Act.

3. New Zone Enterprises entering the SEZ shall be entitled to all SEZ incentives asprovided in the Act. Zone Enterprises acquiring the premises from existingoperations may be eligible for SEZ incentives as a new Zone Enterprise providedit meets at least one of the following criteria:

(a) the nature of the operations on the site will be changed to producedifferent goods, use different processes, or conduct different activities; or

(b) The new Zone Enterprise is not associated with the old enterprise.

49.Extraterritorial benefits Extraterritorial zones may be defined by the BOA in conjunctionwith the Federal Board of Revenue and the State Bank of Pakistan. Additional policies and

rules relating to preferential customs within such zones shall be adopted separately.


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CHAPTER X OVERSIGHT AND ENFORCEMENT

50.SEZ Certification

1. The concerned SEZ Authority shall certify the SEZ once it has become

operational.

2. The milestones that the Developer is required to achieve in order to have theSEZ deemed operational shall be specified in the Developer Agreement.

3. The SEZ Committee shall inspect the civil works within the SEZ to ensure thatthey are built to the standards as stipulated under Rule 43. The SEZ Committeeshall designate a panel of qualified certified engineers for this task.

4. The Developer may avail the SEZ incentives prior to receiving certification.However, if certification is not attained by a deadline set out in the Development

Agreement, then the qualification for incentives shall be suspended until therequirements are met.

51.ZoneEnterprise Certification

1. The SEZ Committee shall certify each Zone Enterprise once all of the criteriahave been met and such certification shall qualify the Zone Enterprise forentitled benefits.

2. To be certified, the Zone Enterprise shall be required to achieve the following:

(a) Commence Commercial Activities no later than twenty four months afterapproval of Zone Entry Application;

(b) Be engaged in the Authorized commercial Activities that are described inits application.

(c) The Zone Enterprise may apply to the SEZ Committee to amend orchange its authorized commercial activities which may consider the sameas per authorized commercial activities as well as prohibited activities listfor the specific SEZ and that whether the said change is anyway harmfulto the neighboring Zone Enterprises or the overall scheme of the

particular SEZ;

(d) Meet the investment density requirement;

(e) Comply with all SEZ building Codes as certified by the designated panelof the SEZ Committee which shall not issue such certification unless thefacilities are compliant with the building code;

(f) Comply with the environmental, labor and other applicable laws/standards; and

(g) Be in compliance with any other commitments as agreed with theDeveloper and the SEZ Committee.


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52.Sanctions for Failure to achieve Certification

1. The Zone Enterprises that fail to commence construction within six months ofthe approval of their Zone Entry Applications, shall have their approval revoked.

2. The Zone Enterprises that fail to meet the certification requirements of Rule 51may remedy the deficiencies as long as the timing requirements of sub-clause (a)of sub-Rule (2) of Rule 51 are met.

3. Zone Enterprises that have commenced construction but fail to meet the timingrequirements of sub-clause (a) of sub-Rule (2) of Rule 51 or do not remedydeficiencies in terms of sub-clauses (b) to (f) of sub-Rule (2) of Rule 53 withinthe time frame shall have the following options:

(a) To apply for an extension period by providing the Developer and the

SEZ Authority with a formal application containing the reason(s) fordelay and the plan for implementation during the extension period. Theextension period may not exceed twelve months. A monthly fine shall beassessed on the Zone Enterprise in the amount of ten percent of the total

value of the land lease for the duration of the extension period orequivalent in case of sold land. Failure to pay the fine shall result in therevocation of the approval and result in the remedy in sub-clause (c)below;

(b) Apply to the SEZ Authority for a No Fault Extension with evidence thatthe delay was due to a Force Majeure event, a failure of the Developer to

provide required infrastructure, or a failure of an agency in processing anecessary approval within the legally allotted time. If it is satisfied withthe evidence, the SEZ Authority may grant an appropriate extension

without charging a fine; or

(c) To abandon the project either clearing the site of any improvements at itsown cost or leaving the improvements, depending on the agreement withthe Developer.

53.Decertification and sanctions for Enterprises in operation

1. Failure of a Zone Enterprise to comply with standards after it is in operation mayresult in decertification and sanctions as follows:

a) A Zone Enterprise that ceases authorized commercial activity shall bedecertified by the SEZ Committee. Decertification shall be done once aZone Enterprise has not been in operation for six months;

b) A Zone Enterprise that changes its activities to those that are prohibitedwithin the SEZ shall be required by the SEZ Committee to ceaseoperations.

c) A Zone Enterprise that fails to comply with any requirements under sub-clauses (c) to (f) of sub-Rule (2) of Rule 51 shall have its certificationsuspended until such violations are remedied. During the suspension


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period, the Zone Enterprise shall not be eligible for any SEZ incentives,although the time under suspension shall be counted towards its eligibilityperiod. In this regard:

i. the Zone Enterprise may remain in operations during the

suspension period unless it is ordered by the SEZ Committee tocease operations due to violations of regulations or its violation asaforesaid causes material harm to the SEZ and other ZoneEnterprises within the SEZ as determined by the SEZCommittee.

d) The decertification process shall be included in the land lease agreementand shall include the following provisions:

i. Decertified Zone Enterprises shall cease to qualify for SEZincentives;

ii. Decertified Zone Enterprises shall have a twelve months' graceperiod to apply for reinstatement. The reinstatement applicationshall be evaluated against the same process and criteria as Zoneentry applications.

iii. Decertified Zone Enterprises shall have the same twelve months'grace period to transfer ownership of the land lease and realproperty to another person. Any person assuming the lease shallfirst be approved by the SEZ Committee as meeting the Zoneadmissions criteria;

iv. If the twelve months' grace period expires or if the ZoneEnterprise does not elect to avail the grace period, the Developershall have the right to purchase the land use rights from the ZoneEnterprise at the value of the remaining lease term calculatedfrom the cost that was originally paid and the improvementsmade upon the land at a value assessed by a third party appraisercertified by the SEZ Authority for such purposes. The cost of theappraiser and any other direct costs of the transaction shall bededucted from the payment made to the Enterprise;

v. If the Developer does not elect to acquire the property rights atthe end of the grace period, the SEZ Committee shall endeavorto sell the property. Upon sale of the property, the original landlease agreement shall be terminated and the value of theremaining lease term calculated from the cost that was originallypaid shall be returned to the Zone Enterprise net of any directcosts of the transaction;

vi. If the property has not been sold after twelve months, the SEZCommittee may elect to demolish and remove any improvementson the land without the consent of the Enterprise. The Developershall then terminate the original land lease agreement and returnthe value of the remaining lease term calculated from the cost that

was originally paid, net of demolition costs, to the Zone


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Enterprise; and

vii. If a bank has taken possession of the property and assumed theland lease agreement due to default of the Zone Enterprise, theabove process shall still apply;

e) Zone Enterprises that sell or lease their property to another ZoneEnterprise that is approved by the SEZ Committee shall be decertified;and

f) The SEZ Committee shall immediately notify to the SEZ Authority andthe BOA on actions of decertification.

54.Appeals of decertification

3. A Zone Enterprise may appeal its suspension or decertification before the BOA.

The BOA shall issue the Zone Enterprise a show cause notice setting out thegrounds for decertification and a fair hearing in person or through a dulyappointed representative.

4. A Zone Enterprise aggrieved by imposition of a sanction or by the suspension orcancellation of its certification shall be entitled to seek relief through alternativedispute resolution forums as set in these Rules and may also appeal before theHigh Court of the relevant province and in case of Islamabad Capital Territory,Islamabad High Court, as the case may be.

55.Authority of BOA and SEZ Authority

The SEZ Authority and the BOA may require a SEZ Committee to commencedecertification proceedings against a Zone Enterprise for sufficient cause.

56.Oversight of Developers

l. The SEZ Authority shall have primary responsibility for overseeing theperformance of Developers.

2. The SEZ Authority shall submit to the BOA an annual report on the detailedperformance of the SEZs within its jurisdiction. The annual report shall include:

(a) Certification that each SEZ is being operated in accordance withits Development Agreement;

(b) Summaries of the status of each SEZ, including the number of ZoneEnterprises in operation, new Zone Enterprises starting operations inthe year and the amount of remaining unsold or un-leased land; and

(c) Details of any problems or issues within SEZ that require remediation.


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CHAPTER XI BUDGET & ACCOUNTS

57.Annual Budget Statement

The Secretary BOA/BOI shall, in respect of SEZ Secretariat for each financial year,

prepare the annual budget estimates on prescribed formats and dates for BOAsconsideration and approval. This annual budget shall be signed by Secretary BOA andanother official authorized in this regard. The annual budget document shall comprise ofa statement of the estimated receipts and expenditure for allocation of funds for the nextfinancial year.

58.Annual Accounts

5. An annual report comprising of the following items shall be prepared andpresented to the BOA with a period of four months from the end of eachfinancial year:

a) financial statements;b) external auditors report;c) SEZs activities, progress and future outlook by Secretary BOA;d) Agreements with other countries/international organizations with regards

to SEZs.e) Estimated addition made to exports, GDP, employment and generally

acceptable performance indicators.f) Seminars, conferences, training programs organized.g) Investment, implementation of the Act and recommendations report by

Chairman BOI.

59.Annual Audit of the Accounts

6. The Annual Accounts of the SEZ Funds shall be audited annually by the AuditorGeneral of Pakistan and copy of the same shall be provided to Secretary BOAfor review and comments who shall forward a copy of the same to Head Internal

Audit.

7. The Annual Accounts of the SEZ Funds shall also be audited by a reputedinternational firm of chartered accounts every year to enhance credibility andstrengthen confidence of domestic and foreign investors/stakeholders.

60.Internal Controls

The BOA shall establish adequate internal controls including but not limited tomaintaining a duly approved organizational chart, clear articulation of duties and jobdescriptions at different levels of the hierarchy, well defined procedures and a systems ofinternal audit. The internal controls shall be designed to ensure accuracy and reliability ofthe reports prepared in the context of SEZ.


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61.Internal Audit & Compliances

1. The BOA shall ensure that a proper internal check and internal controlmechanism is in place to prevent and detect errors and irregularities and to guard

against waste and loss of public money & properties.

a) There shall be established a formal Internal Audit and ComplianceDepartment reporting directly to Secretary BOA.

b) The Internal Audit Department shall prepare annual internal audit planfor BOAs approval with estimated resources required to perform thesame including manpower.

c) Internal Audit shall have access to all the records, officers andsites/offices all the time and they shall have the right to have such

evidence as they deem appropriate.

d) The Internal Audit shall issue its monthly report as well as a consolidatedreport with its recommendations to the BOA.


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CHAPTER XII FINANCIAL RULES

62.SEZ Financial Rules

1. a) Receipt Of SEZ Funds In BOI FundThe Receipts/Fund related to SEZs may be collected and kept in separateand distinct accounts within BOI Fund of Board of Investment inaccordance with the prescribed Financial Rules, Regulations andProcedures of Government of Pakistan.

b) Charge of fees by BOIThe Board of Investment having been assigned various functional andadministrative responsibilities under the Act, is authorized to charge feesand charges from various stakeholders as approved by the BOA fromtime to time.

2. Disbursement From BOI Fund On Account Of SEZ

The BOI shall follow the prescribed Financial Rules, Regulations and Proceduresof Government of Pakistan for disbursement out of SEZ Funds.

3. Administration of SEZ Fund

a) The SEZ Fund shall be administered by the BOI for performingfunctions described in the Act. .

b) Secretary BOA shall be the Principal Accounting Officer (PAO) in thecontext of SEZ Funds.

c) Secretary BOA being PAO, shall be responsible for ensuring that thefunds are being utilized for the purpose of which the receipts/funds werecollected, granted, allocated or otherwise authorized.

4. Delegation of Powers under Financial Rules

The Secretary BOA, being PAO under these Rules may delegate all or any of itspowers to an officer of relevant and appropriate rank with the approval of BOA.

5. Payment Instructions

a) The following steps shall be followed in making all payments:

i. Sanction of expenditure by the competent authority as perdelegation of powers.

ii. Preparation of claim voucher (bill) for payment.iii. Approval of expenditure by the competent authority as per

delegation of powers.iv. Registration of purchase order/claim voucher.

v. Issue of cheque by the authorized officersvi. Recording of expenditure in the accounting record.vii. All cheques should be written in indelible ink.


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6. System of Account

a) The BOI shall maintain separate accounts for SEZ Funds which shallenable their clear distinction from the BOIs Funds. The system of

accounts in the context of SEZ Funds shall be as under:

i. Preparation of Accounts:The accounts shall be prepared as perpractice of Controller General of Accounts/Auditor General of

Accounts (AGP) and New Accounting Model as amended fromtime to time.

ii. Chart of Accounts: The BOI shall follow the Chart of Accountsprescribed by the Controller of Accounts for the purposes ofReceipts/Funds relating to SEZ.

iii. Books of Accounts: All the prescribed sets of books of accountsshall be kept for funds related to SEZ including but not limited tothe following:

a. Cash Book (Form TR-4)b. Cheque Book Registerc. Cheque Registerd. Stock Register, Dead Stock Registere. Register of Contractsf. Register of Assetsg. Budget Control Register/Statement of Releases

h. Disbursement Registeri. Statement of Expendituresj. Register of Advances (Advance Payments)k. Record of Reconciliation with the Bank/AGPRl. Transfer Entry Order Register

b) Reconciliation of Receipts and Expenditure

At the close of each month, the BOI shall reconcile its books of accountsin the context of SEZ funds with the Bank/AGPR records. Thereconciliation shall be performed in accordance with the procedure laid

down in APPM/GFR and Federal Treasury Rules.

7. Closing of monthly and annual accounts

a) The accounts of the SEZ Fund shall be closed on the last day of eachmonth.

b) The closing of annual accounts of the SEZ Funds shall be the 30th Juneof each year.


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8. Purchase of Goods and Services

The Public Procurement Rules 2004 as amended from time to time shall befollowed by BOI, where applicable, for purchase of goods and services in thecontext of SEZs.

9. Approval/Amendment of Rules

The BOI may, as empowered under Section 40 of the Act, review these Rulesand may prescribe any change/addition or deletion therein as well as may alsoprescribe any procedure and format under these Rules with the approval of theBOA.

10. Effective Date of SEZ Financial Rules

These Rules shall be effective upon their approval and announcement by BOA.

11. Establishment of Funds by SEZ Authorities

The SEZ Authorities may establish their own Funds for the purpose of financingtheir operations. The administration of such Funds shall be as per their respectiveprovincial rules of businesses.


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FIRST SCHEDULE


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Annex-1

ZONE ENTERPRISE ADMISSION CRITERIA

[NAME OF SEZ]

1. The enterprise is in designated industry/sector as appropriate for the zone; and

2. The sponsors/owners/present management has/is:

a) not engaged into any illegal industrial, financial or services business ordealings;

b) not defaulted in their loans towards banks along with the companies in

which they are director or major shareholder;

c) never been convicted of fraud or breach of trust or of an offenceinvolving moral turpitude or removed from service for misconduct;

d) neither been adjudged as insolvent nor suspended payment of his debtsnor has compounded with his creditors;

e) net-worth as per wealth statements submitted with the tax authorities isnot less than twice the amount to be subscribed by him personally;


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Annex - 2

DOCUMENTS TO BE ATTACHED WITHZONE ENTERPRISE ENTRY APPLICATION

1. Business Plan especially stating next five years production, exports, employmentgeneration, domestic raw material consumption, imported raw material, and local andimported machinery.

2. Land, utilities and the services required from SEZ and the time line thereof.

3. Description and sources of employment.

4. Certified copy of the Certificate of Incorporation/Registration of Firm

5. Certified copy of Memorandum & Articles of Association.

6. National Tax Number Certificate and General Sales Tax Number Certificate.

7. List of owners and key managerial staff with their NIC, NTN, cell, email and addressesalong with their CVs/profiles. In case of foreigners, their passport numbers are requiredin place of NIC.

8. Business Profile of the company/firm

9. Financial statements and income tax returnslast 3 years

10. Name, address, NIC, NTN, Phone, Email of Principal Officer

11. Entry card Applications of the persons immediately required to enter into SEZ

12. Application fee of in the shape of demand draft/pay order in favor of the person as maybe prescribed.


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Annex-3

FORMAT OF ZONE ENTERPRISE ENTRY APPLICATION

[NAME OF SEZ][The application should be submitted in six copies along with Demand Draft of Rs._______/-]

Date:

Reference:

The Chairman

SEZ CommitteeSEZ [full name]

Address

Dear Sir/Madam

ZONE ENTERPRISE ENTRY APPLICATION

We, the (name of the Organization)______________________________________________

hereby apply for admission into SEZ (full name of SEZ)____________________. We hereby

undertake to abide by all the Rules and Regulations of SEZ and all the applicable laws of

Pakistan. The necessary particulars are given below and the requisite documents are attached.

PART ONE

1.1 Name and Address of the Applicant organization

1.2 Status of the Applicant (company/firm/proprietorship)

1.3 Address of the Applicant

1.4 Email Address of the Applicant

1.5 Website

1.6 Telephone

1.7 Fax No.

1.8 National Tax Number

1.9 General Sales Tax Registration Number

1.10 Name of Principal Officer for all practical purposes

1.11 Email, Phone, fax and address of Principal Officer


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PART TWO

2.1 Nature of Business

2.2 Small Scale/SME/Large scale

2.3 Total Project cost

2.4 Equity

2.5 Loan

2.6 Other such as grant etc

2.7 Foreign investment & type i.e. equity/loan/machinery (please specify core terms)

2.7 Details of foreign technical collaboration

2.8 List of machinery to be imported & possible countries of import

PART THREE

3.1 Annual production capacity

3.2 Products to be produced

3.3 Similar local products

3.4 Similar imported products

3.5 Expected yearly values for five years of the products to be produced

3.6 Are the products to be produced for local market or export or both?

3.7 If products are to be produced for export, values for five years in $ terms

3.8 Name of the raw materials to be consumed

3.9 Yearly expected value of raw materials to be consumed for five years

3.10 Net foreign exchange inflow/outflow over first five years on yearly basis

3.11 Annual projected profits for the first five years

3.12 Annual employment generation - first five years (separately specify male and female)3.13 Foreigner employee are required and if so how many and their expected induction

PART FOUR

4.1 Land requirement in Acres4.2 Need Warehousing/storage facility and if so nature and area required in sq meters?4.3 Electricity requirement (Please quantify)4.4 Will you set up your own generator and if so, of what capacity and fuel?4.5 Gas requirement

4.6 Water requirements (annual) and if possible for the next five years4.7 Landline Phone requirements4.8 Nature of water to be drained in SEZ Sewerage (annual outflow estimates for first five

years) and its treatment status.4.9 Quantum and nature of effluents and their mode of disposal4.10 Wastes and their disposals

I/We hereby declare that the above statements and attached documents are true and correct to

the best of my/our knowledge and belief. I/We shall abide by any other condition, which may be

stipulated by the SEZ Committee/Developer.


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I/We fully understand that Approval/Admission granted to me/us on the basis of these

statements and attached documents and in case they are found incorrect or false, the

Approval/Admission is liable to cancellation or any other action that may be taken having regard

to the circumstances of the case.

You are requested to kindly process the Application in due course of time and meanwhile issueus an acknowledgement and oblige.

Thanking you

Sincerely

Signature___________________[stamp]Name of the Authorized Signatory

Email Address

Phone No.

Fax No.

For Official Use Only

Application No. _____________________________________________________________

Demand Draft/Pay Order No._________ dated _________ Bank ______________________Received by ___________________________ dated_________________ Time___________

Attachments:

1. Business Plan especially stating next five years production, exports, employmentgeneration, domestic raw material consumption, imported raw material and local andimported machinery.

2. Land, utilities and the services required from SEZ on the time line.3. Preliminary architectural drawings.4. Description and sources of employment.5. Certified copy of Certificate of Incorporation/Registration of Firm

6. Certified copy of Memorandum & Articles of Association.7. National Tax Number Certificate and General Sales Tax Number Certificate8. List of owners and key managerial staff with their NIC, NTN, cell, email and addresses

along with their CVs/profiles. In case of foreigners, their passport numbers are requiredin place of NIC.

9. Business Profile of the company/firm10. Financial statements and income tax returnslast 3 years11. Name, address, NIC, NTN, Phone, Email of Principal Officer12. Entry card Applications of the persons immediately required to enter into SEZ13. Application fee of Rs. _________in the shape of demand draft/pay order in favor of the

person as may be prescribed.


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Annex-4

FORMAT FOR LETTER OF APPROVALOF ZONE ENTERPRISE ENTRYAPPLICATION

OFFICE OF SPECIAL ECONOMIC ZONE [FULL NAME OF SEZ ZONE]

DateReference No.

Mr/Miss/Madam [full name as per Application]Designation

Organization nameFull address

Dear Sir/Madam

APPROVAL OF ZONE ENTERPRISE ENTRYAPPLICATION

Please refer to your Zone Enterprise Entry Application No. _______________ dated__________.

We are pleased to inform you that your Application h

SEZ Rules (BOA Approved)

Documents

Transcript of SEZ Rules (BOA Approved)